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Retail

Walgreens Q1 Profit Beat Helped By Higher Drug Prices, Cost Cuts

By Reuters
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Walgreens Q1 Profit Beat Helped By Higher Drug Prices, Cost Cuts

Walgreens Boots Alliance reported better-than-expected quarterly profit, as cost-cut measures and higher drug prices boosted its pharmacy operations, and the company nearly halved its dividend to accelerate its savings measures.

Shares of the Deerfield-Illinois based company rose more than 3% as the US pharmacy giant cut dividend payment by 48% to 25 cents per share.

The stock lost about 30% in 2023. Fierce competition from rivals, sharply lower sales from COVID vaccines and testing, and decreased discretionary spending by inflation-weary consumers, have forced the company to close unprofitable stores and cut jobs.

'Disciplined Execution'

Walgreens first-quarter performance reflects "disciplined execution in a challenging consumer backdrop," said CEO Tim Wentworth.

"We are evaluating all strategic options to drive sustainable long-term shareholder value, focusing on swift actions to right-size costs and increase cash flow," Wentworth said.

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The company appointed the healthcare industry veteran in October as its CEO. It is looking to emerge from the troubles surrounding it and expand its footprint in healthcare services.

Quarterly Highlights

Its US retail pharmacy unit brought in revenue of $28.94 billion in the first quarter, topping analysts' average estimate of $27.26 billion.

On an adjusted basis, the company reported earnings of 66 cents per share for the quarter, above the average analyst estimate of 61 cents per share, according to LSEG data.

The company's healthcare services unit garnered revenue of $1.93 billion, compared with analysts' average estimate of $2.03 billion.

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Same-store sales at its US retail pharmacies increased 13.1% year-over-year, aided by higher drug prices and strong execution in pharmacy services.

Boots UK

Boots UK reported sales growth of 6.2% during the quarter, while the Germany wholesale unit saw 3.7% growth.

According to GlobalData, sales at Boots was boosted by its performance during Black Friday as shoppers pampered themselves and loved ones.

Tash Van Boxel, retail analyst at GlobalData, said, “The Black Friday promotional period proved instrumental to Boots’ performance this quarter as store sales increased 7% during Black Friday week on the comparative period last year as consumers took advantage of price drops.

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"Promotions within fragrance, electrical beauty, skincare and premium beauty appealed the most, with consumers using the promotional period to restock their beauty must-haves and trial items as an extra treat."

Boxel added that shoppers prioritised Christmas gifting during Black Friday, with 70.9% of stating that they bought at least some of their Christmas presents during this period.

News by Reuters, additional reporting by ESM.

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